Back on December 15, I sent a
letter to clients of Polyconomics to assure them that while I thought
President Clinton probably was going to be impeached and convicted, because of
Sidney Blumenthal's testimony. Wall Street would continue to advance. That is,
equity values and the future of the U.S. economy that they forecast do not
depend upon the President remaining in the Oval Office. This is what I do for
a living, so I'm not making a big deal out of it. Now that more than a month
has passed, you might appreciate the analysis that routinely underpins the
work we do at Polyconomics. Since we sent this out, the Dow Jones Industrial
Average has climbed to 9200.23 from 8823.30 and the NASDAQ has climbed to
2407.14 from 2012.60. Following is the December 15 letter:

December 15, 1998 IMPEACHMENT ON WALL STREETJude
Wanniski

There of course is no doubt that an
impeachment vote on Thursday will increase the risks to dollar-based equity
assets. All year long we’ve seen the blue chips react to the ups and downs of
the President’s fortunes relative to the Starr investigations. It isn’t that
Wall Street prefers a President Clinton to a President Gore, but that
uncertainties about the management of Superpower USA rise on every front as
investors try to peer over the horizon. On the other hand, nothing fundamental
will change if the process runs like clockwork. The President’s advocates warn
the process could take several months, during which the world will be in
limbo. It should not take that long, though, and as the Senate leadership is
able to discuss the parameters involved, heightened risks based on sheer
uncertainty will recede. In this analytical model, a Senate vote to convict
Bill Clinton and have him removed from office would have the DJIA recover any
lost ground and then some. There is nothing about the President’s vacating the
Oval Office that is intrinsically threatening to the structure of global
finance. The risks have to do with unknown eventualities that are mishandled
because of the distractions inherent in the process.

Assuming the House will vote articles of
impeachment on Thursday, a Senate trial would probably begin right after the
first of the year. Because the Senate is a continuing body and the House is
not, there really is no problem in having the 106th Congress adjudicate
articles of impeachment produced by the 105th. Managers of the impeachment
appointed by the House immediately following the Thursday voting -- Judiciary
Chairman Henry Hyde certainly among them -- would have to be reappointed when
the House is reorganized as the 106th in January. Once done, the trial could
proceed with dispatch. Majority Leader Trent Lott indicated it could
theoretically be concluded in a three-week period, but even if it stretches to
three months, the time frame is not one that would cause extraordinary
disruption to the ordinary business of Congress. Some of the risks for the
financial world have already been reduced because of the outcome of the
November elections. With Speaker Newt Gingrich gone and a replacement, Bob
Livingston, conditioned by temperament to work with the other party, the
appropriation process should be the easiest in recent memory.

My expectation is that the atmosphere
surrounding a Senate trial would be far less partisan than what we observed
last week -- when Judiciary’s Democrats did their partisan best to minimize
the problems faced by their party’s leader. The idea the President need fear
nothing because it takes 67 votes to remove him and the Republicans have only
55 is based on a total misreading of the process. All Senators view themselves
as members of the world’s greatest deliberative body. They now understand that
the United States is the Global Sovereign, and the President is the highest
elective official on the planet’s political pyramid. If they decide he
perjured himself, it will be easier for them to vote to “cleanse the office,”
as Henry Hyde puts it, than now is surmised. The reason enough Democratic
Senators might vote to convict is the realization that what the President has
done is poisonous in its influence on the national culture -- and an example
to the rest of the world that the American President can violate his oath of
office.

The White House now believes there would be no more than five
Democratic Senators prepared to vote for conviction. What I believe will swing
many more against him is the testimony of Sidney Blumenthal, one of his most
devoted aides, who lets us see what Bill Clinton was prepared to do to Monica
Lewinsky when he feared the cover story they had prepared in the Paula Jones
case had been broken. Forget the fact that Monica still was prepared to lie
for him. The President at that evil moment in late January believed he had to
use the powers of his office to destroy her. As I noted in a memo I wrote
Monday to Chairman Hyde:

How can I say the
Republicans on your committee voted purely on principle? First, your own
framing of the hearings and your conduct throughout was clearly based on
pure principle. Secondly, the careful piecing together of the evidence by
your majority counsel, David Schippers, clearly demonstrated probable cause
that the President was prepared to lie about his behavior in the same way a
rapist will accuse his victim of having lured him into his attack. As an
added ugly twist, the President told his aide Sidney Blumenthal that Monica
Lewinsky had threatened him with exposure unless he submitted to sex with
her. To see into the President’s soul at a moment when he thought it was his
word against that of his victim was enough to persuade me that he does not
belong in the presidency. It will take a Senate trial to make it obvious he
had to be removed in order to cleanse the office.

The Blumenthal testimony makes
it practically impossible for the Senate to minimize the President’s behavior
by arguing “it does not rise to the level of impeachment.” The President has
so disgraced himself and the office of the presidency that the issue is beyond
punishment. The shame isn’t that he has used the trappings of his office to
invite sexual favors. Powerful men do that and the electorate knew it about
Clinton when they elected and re-elected him. We can excuse sin because we are
all sinners. We are not all criminals, though, and what our President did was
criminal and cannot be excused. Republicans who have announced opposition to
impeachment are now changing their minds on the basis of this evidence. The
Democrat party elders, who have not yet faced this fact and continue to make
believe it did not happen, will be forced to stare it in the face in the
Senate. Maybe I am completely wrong about this, but I fully expect the
President to resign when a delegation of party elders informs him there is no
room for acquittal and no point to a censure.

The White House press secretary, Joe
Lockhart, now pathetically warns against an impeachment vote in the House
because it will cause uncertainty on Wall Street. Almost providentially the
market greeted his warning by bouncing back today, even as reports piled up
that the number of undecided Republicans had dwindled to a few and the number
of Democrats considering an impeachment vote were rising. There are a great
many uncertainties facing the world’s financial markets. This is only one of
them. For the Republican Congress to be acting on pure principle, as I believe
it is, should not produce negative consequences. There’s no reason this
particular uncertainty will produce any greater risks than it has
already.